Notes for a statement by Quebec

Equalization and Regional Disparities
I
The problem
From 1867 on, federal grants have been paid to the provinces
under section 118 of the BNAA. This form of financial assistance
proved in the long run to be marginal in comparison with the
provinces‘ own financial resources and obligations. That is why,
afterward, various formulas were developed by which the federal
government could contribute financially to the provinces. Some
had conditions: these were joint programs the principle of
which was questioned by some provinces, particularly Quebec.
Other contributions carried no conditions.
The best—known of the contributions without conditions
were obviously the equalization payments set up from 1957 on.
Although the way in which payments were calculated has frequently
been changed since, the essential nature of the plan has
never altered. A number of provinces do not want the principle
changed, and would like to see it enshrined in the constitution
itself.
The struggle against regional disparity has only recently
become a concern of the government. Nevertheless, however
effective they really are, a number of programs aimed at reducing
regional disparity exist at the present time.
1Equalization involves essentially a system of redistributing to
the provincial governments a portion of the revenues the federal
government levies in all provinces. Part of the taxes paid to
the federal government are distributed to the provinces according
to their relative wealth, the richest provinces receiving nothing,
and the poorest provinces receiving equalization payments. These
payments are not given for specific purposes; the recipient governments
add thempto their general revenues and can therefore use them as
they wish. Thus, equalization payments set no conditions.
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2
All these matters were brought up when constitutional
reform was discussed between l968 and l97l and at the time
there was almost a consensus on the subject of regional
disparities, to appear in the Victoria Charter. In 1975-76,
the same ideas were taken up again in a paper forwarded to his
colleagues by the Prime Minister of Canada (draft proclamation
on the constitution) in which the provinces later suggested
that explicit mention should be made of equalization.
During the discussions at the constitutional conference
in February 1979, general agreement was reached on the
objectives mentioned above, but it was not possible to reach
agreement on the advisability of including the principle of
equalization in the constitution.
Equalization and the struggle against regional disparity
are subjects to which considerable attention has been devoted
during discussions on the constitution in recent years.
II — Equalization: the principles and the method of calculation
Broadly speaking, all the governments have agreed to include
this form of payment to the provinces in a renewed constitution.
The Government of Quebec would like to reiterate its agreement
that provisions be included in the constitution permitting the
federal government to make unconditional payments to the
provincial governments, to enable them to provide adequate services
for their people, without having to impose an excessive tax burden
on them. What is involved is enshrining in the constitution a
practice which has existed since 1867, in one form or another,
and which has been in its present form for over twenty years.
This addition to the constitution in no way alters current practice;
it would merely confirm it.
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As for the specific way in which levels of payment should
be calculated, and recipients determined, Quebec, like other
provinces, believes that these problems should be examined
and, if necessary, periodically altered in response to changes
in economic and financial situations. With this in view,
the provincial and federal First Ministers could review the
question at least once every five years. It goes without
saying that more frequent meetings of Ministers of Finance and
government officials could ensure that the system works well.
This is in fact what happens at present, and would not involve
any change.
III — The struggle against regional disparities
The Government of Quebec is also in agreement with the idea
that a formal commitment could be made by all governments in the
constitution itself on the subject of regional disparities. The
best way of decreasing regional disparities remains undoubtedly,
for Quebec, controlling all the tools for its economic development
and effectively taking in hand the means that have often escaped it
in the past. This commitment to combat regional disparities must
therefore be understood and interpreted, first and foremost, as
a statement on the part of the provinces that they consider themselves
responsible for their own development, rather than an essentially
passive entrusting of their economic well-being to Ottawa’s tender care
IV – Quebec’s position
The inclusion in the constitution of the principle of
equalization and a commitment to combat regional disparities is
therefore not an invitation to the federal government to extend
in any way a spending power which has led to abuses. Quebec
will have specific proposals to submit when the question of
spending power comes up on the constitutional reform agenda.
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Quebec does not believe that direct payments to economic
agencies or individuals over the provinces’ heads, as was
done in Quebec in the case of the dispute over the sales tax,
is an acceptable form of federal intervention; either such
actions should not take place, or they should only take place
with the formal consent of the provincial government concerned
and following procedures it has approved.
In short, the Government of Quebec is in agreement with
the idea of including in the constitution theprinciple of
unconditional federal payments to the provincial governments
in the form familiar to us over the last twenty years as
equalization payments; such payments should constitute the
preferred way to correct regional disparities.
Outside this framework, Quebec is prepared to see included
in the constitution the principle of a commitment by all
governments to combat regional disparities, but does not accept
that by so doing, a new door be opened to increased intervention
by the federal government in the development of the regions.
Nor does it agree that the fight against regional disparities
be used as 6 noble pretext or justification for further
interference by the federal government in areas in which provincial
responsibility must remain paramount.
The attached constitutional text, taken mainly from texts
which have already been discussed and generally accepted, expresses
Quebec’s concerns.

APPENDIX
Quebec’s proposal
ggualization and regional disparities
1. Without altering the legislative authority of Parliament
or of the legislatures Or the rights of any of them with
respect to the exercise of their legislative authority,
Parliament and the legislatures, together with the
government of Canada and the governments of the provinces,
are committed to
a) promoting equal opportunities for the well—being
of all Canadians;
b) furthering economic development to reduce
disparities in opportunity; and
c) providing essential public services of
reasonable quality to all Canadians.
2. Parliament and the government of Canada are further
committed to the principle of making equalization payments
to provincial governments that are unable to provide essential
public services of reasonable quality without imposing
an undue burden of taxation.
L The Prime Minister of Canada and the First Ministers of
the Provinces shall review together the questions of
equalization and regional development at least once
every five years at a meeting convened pursuant to
section ( ).
July 1980

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